Investors seeking the enforcement of arbitral awards against Russia or its citizens can seek recourse in the domestic courts
of their own or third party states under the NY Convention. As clearly expressed
in Article II(1) each Contracting State shall recognize a arbitral award if
there is an agreement in writing to submit the dispute to an arbitral panel.[1] Furthermore,
under Article III Contracting Stats shall enforce such awards.[2]
The qualification to this is that there must be some seizable asset within the
jurisdiction of the court being asked to enforce the award. Furthermore, in the
United States a court must be able to establish jurisdiction over those assets.
It is unlikely that a Russia would be subject to general jurisdiction within
the United States because their contracts do not seem systemic and continuous.
Furthermore, unless the subject of the dispute arises out of contacts that
Russia purposefully directed to the United States asserting specific
jurisdiction is not proper. However, if Russia or a Russian citizen who is a
party to the dispute has some property in the US it is possible to establish
quasi in rem jurisdiction. However, principle of sovereign immunity may still
protect some of Russia’s assets.[3]
Clearly,
the laws and policy of the country in which enforcement of the award is being
sought will govern. While attempting to enforce a arbitral award through to
seizure of Russian assets in a different country can be a tricky and tenuous
ordeal, the courts of some nations have expressed a willingness to allow such
actions. Sedelmayer v. Russian Federation illustrates this point. The
arbitration arose out of an alleged expropriation due to a Russian presidential
decree in 1994. In 1998, the Arbitration Institute of the SCC awarded Franz
Sedelmayer $2,350,000. Russia refused to abide by the award and litigation in
Germany and Sweden ensued. Over 30 different executions against the Russian
Federation were filed and consequently only two of those actions were
successful. The German court explained that the only Russian assets not
protected by principles of sovereign immunity were those used for commercial
purposes. In the end, Mr. Sedelmayer was able to prevail in an execution
proceeding against a former KGB compound in Cologne that Russia has been
renting out for commercial purposes.[4]
This case shows that it is possible to attain enforcement of arbitral awards
through the seizure of assets but such instances are rare. So rare that Mr. Sedelmayer
is the only individual to obtain such an award against Russia. However, this
method of enforcement is likely to be a successful method of receive
compensation from a private party.[5]
The success of Russia’s current
business ventures with China has the potential to do much more than simply
establish partnerships between the two nations. It is a key for Russia to
reopen the door to investment and trading partnerships between itself and the
rest of the world. It is clear the Russia is in need of FDI to allow its energy
sector to maintain its current level of outputs, exploit new sources of oil and
natural gas and to remain competitive. Yet the greater point to take away from
this development is that if through the partnership Russia can show the world
that it is willing to respect the rights of investors and adhere to
international norms then its growth potential will be much greater than simply
through energy exports. Increased international investor confidence will result
in greater FDI into sectors of Russia’s economy that are uncompetitive in
relation to the international market. FDI will inject new technologies, new
ideas and new standards into the Russian marketplace. In turn, this would
revitalize the nation’s economy and allow Russia to become a diverse and more
stable economic power. The Kremlin presently has an excellent opportunity to
reverse the image of its investment climate. Perception is often reality and if
Russian leadership can capitalize on this opportunity, it will not only provide
the nation with economic stability but will improve the lives of its people.
Sources
1.
Russia China in Energy Deal, Wall Street Journal, available at http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-357963/
2. Статья
Министра иностранных дел России С.В.Лаврова «К миру, стабильности и устойчивому
экономическому развитию в Азиатско-Тихоокеанском регионе, available at http://www.mid.ru/brp_4.nsf/newsline/5F3B945C0F67ADF844257BFB002574F0
3. New York Convention on the Enforcement of
Arbitral Awards, Article III available at http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/XXII_1_e.pdf
4. Cody Olson,
Enforcement of International Arbitration Awards Against the Russian Federation,
22 Am. Rev. Int’l Arb. 711, 735.
5. John W. Head, Global
Business Law, 574 (North Carolina Academic Press, 3rd ed. 2012).
6. William R. Spiegelberg, 16 Am. Rev. Int’l Arb.
261, 261 (2005).
[1] Ny Convention New
York Convention on the Enforcement of Arbitral Awards, Article III available at
http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/XXII_1_e.pdf
[2] Id.
[3] Restatement of
the Arbitration Law
[4] Cody Olson,
Enforcement of International Arbitration Awards Against the Russian Federation,
22 Am. Rev. Int’l Arb. 711, 735.
[5] Id.
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